MPs reluctant on removing subsidies

Kuwait:  News about a government study to remove expatriates’ access to subsidies and rationalize subsidies for Kuwaitis garnered mixed reaction from MPs who reiterated the need for reducing spending, but at the same time demanded further studies to avoid inflation and other negative effects that such a decision might bring. It was noted, however, that the majority of lawmakers who spoke to Al-Rai daily on Monday were against the idea of removing subsidies completely from services provided to expatriates. “Removing subsidies will leave a negative impact on expatriates given their limited salaries,” MP Abdurrahman Al-Jeeran said. “The humanitarian side must be kept in consideration during discussion of removing subsidies.” MP Abdulhameed Dashti agreed, and even described decisions to remove subsidies from Kuwaiti or expatriate consumers as ‘random’. “If there are flaws in the budget, the solution must come as a result of a strategic perspective and a plan that the parliament must view and discuss,” he said. MP Abdullah Al-Tamimi, who last month proposed a bill to cut the expatriate population by more than half, said on the other hand that cutting subsidies on services provided to non-Kuwaitis will help ‘save millions’ of dinars annually.

As Kuwait looks for ways to avoid a projected budget deficit in 2021, the estimated KD 7 billion spent annually on subsidies has become a target in many studies and discussions recently. But instead of removing subsidies on services and items, MPs are increasingly demanding that the government should first start by cutting subsidies provided to state departments. “The idea of removing subsidies, while good on paper, must come after thorough studies that follow decisions to reduce spending in the public sector,” MP Adel Al-Khorafi said. “Production in the public sector eats up to 50 percent of total subsidies, and this field is where the government should start by reducing energy and oil production costs,” he added.

Black market Eliminating subsidies on petrol provided to expatriates as suggested by a study made by an economic government committee could lead to creating a black market for fuel in Kuwait, said a source familiar with the government’s plans. “Some Kuwaitis might buy large amounts of petrol, then sell it to expatriates on the black market,” said the source who spoke on the condition of anonymity. The study proposes providing Kuwaitis with specific quotas of subsidized petrol based on their consumption rates, and the price increases gradually if the quota is exceeded. The source clarified in the meantime that studies to remove subsidies “should not be confused with the Ministry of Electricity and Water’s plans to change energy pricing based on categories of consumption”. The ministry had announced recently that a new system will be adopted to collect higher fees from firms and consumers ranked as high consumers of energy.

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